Why DexCom Shares Dove

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of DexCom (NASDAQ: DXCM  ) , a developer and manufacturer of continuous glucose monitoring systems, dipped as much as 13% earlier today after competitor Medtronic (NYSE: MDT  ) announced the approval of its MiniMed 530G by the Food and Drug Administration.

So what: Why are DexCom shareholders in an uproar? Because the MiniMed 530G is Medtronic's first-generate artificial pancreas system capable of continuously monitoring glucose levels in diabetic patients, and also capable of switching insulin injections off when threshold glucose levels are reached via sensory inputs. Medtronic plans to launch its new product over the next couple of weeks. In other words, DexCom has some new competition, and shareholders aren't too happy about it.

Now what: DexCom is a company and a story I'd really like to believe in as its products would presumably have wide appeal on paper with 25.3 million diabetics and an additional 79 million pre-diabetics in this country. However, DexCom still can't find a way to turn a profit yet -- and that's a concern. I'm not saying DexCom won't turn a profit ever, but the simple fact that its share price has more than doubled and it's valued at 17 times trailing 12-month sales despite ongoing losses demonstrates to me that DexCom's potential downside could far outweigh any upside over the next couple of years. My suggestion would be to wait for DexCom's bottom line to catch up with its frothy valuation and stick to the sidelines in the meantime.

Live long and prosper
Did you know that your financial health is just as important as your personal health? The Motley Fool's special free report "3 Stocks That Will Help You Retire Rich" names specific investment opportunities that could help you build long-term wealth and help you retire well. The Fool also outlines critical wealth-building strategies that every investor should know. Click here to keep reading.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2658764, ~/Articles/ArticleHandler.aspx, 7/29/2014 1:56:48 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement